Earlier this year, the private real estate groups Urban American and the City Investment Fund purchased a series of old affordable housing complexes in Harlem and Roosevelt Island for $940 million in the second most expensive real estate portfolio deal in city history. At the time, the purchase looked like another example of old public housing units that had been turned over to private landlords.

But now it appears that the funding for those purchases wasn't exclusively private.

According to an analysis conducted by the Urban Homesteading Association Board, a city and state pension group are investors in the City Investment Fund, a private real estate group that is co-sponsored by Fisher Brothers and the Morgan Stanley Real Estate Fund.

According to the The New York City Employees' Retirement System annual report, the city pension group had given the City Investment Fund $85.9 million through June 2006.

Bill Thompson, the city comptroller, is both an investment adviser and a trustee for the Employees Retirement System (the other trustees include the city finance commissioner, the borough presidents, the public advocate and union leaders).

There is concern at the comptroller's office over whether they invested in a real estate company that might drive rents up and force poor tenants out in formerly public housing units.

"You want to make sure you have no investment that can be tied to a speculative investment that could be pressuring tenants," said Eduardo Castell, executive deputy comptroller. "At this point, it doesn't seem like that type of investment. Based on what they have done and what they are presenting to us, it doesn't seem like that. We will continue to monitor it.

"Our concern is that your investments are providing solid return for your retirees and maintaining a commitment for affordable housing," he continued.

In the biggest New York portfolio deal ever, the $5.4 billion buy of Stuyvesant Town and Peter Cooper Village that closed last fall, there have been dramatic increases in rents in what were formerly affordable housing units.

In any event, UHAB has also found that New York State and Local Retirement System has contributed $46.6 million to the City Investment Fund and $25.7 million to a Morgan Stanley real estate group. It's not clear over what period of time that money was given.

An organizer at UHAB, Dan DeSloover, said he's concerned that pension funds from the city and state have backed investors that purchased buildings that were in the Mitchell Lama program, the 52-year-old state affordable-housing initiative.

"We work very hard to keep these buildings in Mitchell Lama, and then to see that the state and city pension funds are helping to remove them from Mitchell Lama, obviously there's a disconnect there," said Mr. DeSloover.

The biggest building in the purchase, 3333 Broadway, was taken out of the Mitchell-Lama program two years before the purchase. Mr. DeSloover believes there will be an obligation to drive up rents –and thereby remove tenants — in these buildings so the landlords can justify their spending cost.

"A lot of people in these buildings are state and city employees and in the future they're going to depend on these pension funds to keep them through old age," said Mr. DeSloover. "In these apartments there will be pressure to drive them out from the same group that they rely on now."

UPDATE: A spokeswoman from the city comptroller called back to respond to our earlier quesiton: How long has the pension fund been investing in City Investment Fund? Between March 16, 2004 and June 30, 2006 the pension fund invested $85.9 million.